Even More Bad News for Budget Updated X1

1 comment February 8th, 2008

State revenue through the end of this fiscal year may well fall $600 million or more short of expectations, according to the Legislature’s revenue forecasting agency. The year ends June 30.

Yes, $600 million is real money. A shortfall that large could mean serious problems for a state whose backlog of unpaid bills already is endemic. Doctors, hospitals, other health care providers, and other state vendors often wait months to get paid.

The full report is here. Discussion of the projected revenue shortfall begins on page 3.

In summary:

While the FY 2008 budget was implemented with the hopes of recording approximately $1.6 billion in revenue growth–actual performance through January, teamed with a slowing economy, point to revenues falling well short of those expectations. While the Commission will be providing an official estimate at a scheduled March 5th meeting, receipts to date coupled with an anticipated slowing in personal income tax growth could result in overall growth struggling even to reach $1 billion.

The State Journal-Register has more.

What about the next fiscal year, which begins July 1? The revenue picture does not look good. The forecasting agency’s report continues:

Given the current uncertain status of the economy the revenue picture for FY 2009 is far from clear. However, it would appear that limited base growth is the best that can be hoped for. Unfortunately, appetites for expanded health care, education, capital needs, and other worthy programs continue to build. Add to that the continued pension funding pressure, bills incurred but unable to be paid, and the resulting budgetary difficulties continue to build without any signs of slowing.

UPDATE 1

What does all this mean? It’s hard to say.

Certainly, we’ll know much more on Feb. 20, when Gov. Blagojevich announces his budget plan for the next fiscal year. Blagojevich, like many of his fellow Democrats, has a penchant for feel-good, expensive new programs. Remember last year when he proposed (unsuccessfully) his version of universal health care, backed by the largest tax increase in Illinois history?

It’s hard to imagine the governor going a year without a major spending initiative. And he’s not the only one craving more spending. Lawmakers of both political parties typically have their own new spending priorities, which may well be very different (therefore, on top of) the governor’s priorities. They want the state to build new roads, put more money in classrooms, etc.

What do you get when you combine huge appetites for more spending and a general reluctance to raise the income or sales tax, not to mention a governor who refuses to acknowledge the state’s dire fiscal realities? A potential fiscal trainwreck.